Spirit Airlines is considering filing for bankruptcy after a proposed merger with Frontier Airlines failed.
The Miramar, Fla.-based discount airline is expected to file for bankruptcy protection for its debts in as little as 10 days or a few weeks, sources familiar with the matter confirmed to CBS News. The Wall Street Journal was first to report the impending bankruptcy filing.
Spirit acknowledged in a regulatory filing late Tuesday that it was in “active and constructive discussions” with bondholders to restructure its bonds as its business difficulties continue. If negotiations are successful, the airline hopes its operations will continue and its employees and customers will be safe from any impact.
Spirit declined to comment on the matter.
The company’s stock price collapsed after news of a possible bankruptcy filing, falling nearly 55% to $1.46 in morning trading.
In October, Spirit and Frontier restarted merger negotiations after discussions ended in 2022 with JetBlue’s outbidding for Frontier, according to the WSJ. A federal judge blocked JetBlue merger in January due to antitrust concerns.
Spirit, the largest low-cost airline in the United States, has lost more than $2.5 billion since the start of 2020, due to a lull in travel during the pandemic period. The airline faces looming debt payments totaling more than $1 billion over the next year, obligations it likely won’t be able to meet.
During the first six months of 2024, Spirit passengers flew 2% more than during the same period last year, but spent 10% less per mile. The airline’s revenue per mile from fares declined by nearly 20%, contributing to its losses.
At the same time, labor costs have risen and legacy carriers have poached some customers from Spirit by offering their own versions of single tickets to budget-conscious travelers.
Spirit said in an October regulatory filing that it had identified about $80 million in cost-cutting measures expected to begin early next year, according to CBS News Miami. These reductions will be primarily driven by “reduction in force,” the Florida-based airline noted. The carrier also revealed that it had agreed to sell 23 planes to GA Telesis, an aviation services company, for approximately $519 million.
Kris Van Cleave and
contributed to this report.
